How to Get the Best Auto Loan Rates – The Dough Roller
When it comes to buying a car, far too many Americans are likely to simply get a loan from a dealership. And that’s a very bad idea.
Really, it’s better if you don’t finance your car at all. Pay cashwill get you a better deal. And you’ll avoid paying interest on financing.
That said, sometimes it’s enough to finance at least part of your car purchase. You need a vehicle to get to work or transport your children. But you don’t have time to save up to buy the vehicle with cash.
It is understandable and sometimes unavoidable. But just because you have to finance your car doesn’t mean you have to go with what the dealership offers. As with other types of financing, it’s a good idea to shop around for an auto loan. Luckily, the internet makes this easier than ever!
Here, we’ll tell you where to find the best auto loan rates. But before we dive into that, let’s talk about how to prepare ahead of time to get the best rates possible.
Preparing for success
Regardless of the type of financing, you can take steps in advance to ensure you get the best possible deal. Most consumers know this to be true when shopping for a mortgage. But they may not take the same amount of time to prepare for auto loan success.
But even a few small changes can save you a lot of money on your auto loan. Do not believe me ? Here’s how the math works out for a single example, using our Simple Loan Payment Calculator.
Let’s say you need $10,000 in financing. You plan to finance the vehicle over four years. One lender offers you a rate of 5.5% and another offers you a rate of 7.5%.
On the 5.5% loan, your monthly payment will be $232.56. On the 7.5% loan, your payment will be $241.79.
That doesn’t seem like a lot. I mean, $9 a month won’t exactly break the bank. But over time, the difference becomes clearer. You will pay a total of $1,163 in interest on the first loan. On the second loan, you will pay $1,606. Saving almost $500 is definitely worth taking the time to take the following steps! (I used this calculatorto run these numbers.)
Related: 6 ways to overpay your car loan
So what can you do to lower your auto loan rate? Follow these steps before buying a car:
1. Check and improve your credit
Before you start shopping for an auto loan, take the time to check your credit score. You can do this for free quite easily. If you have a credit card, your the credit card company may offer free credit scores. Or you can check out a site like credit karmafor a fairly accurate estimate of the score.
If your score is below the excellent range of 760+, you can improve. Maybe you don’t have time to take months to improve your score. But chances are you can take a few simple steps to increase your score in a month or two.
The most common ways to quickly raise your credit score include:
- Repay revolving debts: Your credit score is largely based on your debt to credit ratio. It is the amount of debt you are carrying compared to the amount of credit you have. Paying off revolving debt can improve this ratio, increasing your score quite quickly.
- Request credit limit increases: Another way to improve your debt ratio is to request a credit limit increase on an existing account. This can put a lot of strain on your credit report, which can temporarily lower your score. It’s best to take this step a few months before shopping for an auto loan. And be strategic. Only ask for a limit increase if you have a good payment history and decent credit, which makes lenders more likely to say yes.
- Correct errors on your report: Many credit reports contain errors, and these can lower your score. If your report shows accounts that don’t belong to you, fix those errors as soon as possible.
- Ask for a goodwill adjustment: Late payments in your credit history can seriously affect your credit score. Fortunately, you can sometimes have these late payments erased. This is especially true if you’ve generally made payments on time but have one or two abnormally late payments. Here’s how to increase your score with goodwill adjustments.
- Be on your best behavior: While you’re in the process of getting a car loan, practice your best credit behavior. This means avoiding accumulating credit card balances, making payments on time, and not asking for any other new credit.
2. Save for a down payment
The amount of your down payment can make a big difference in your auto loan rate. So the more money you can put in, the better. If you can’t put a lot of funds right now, do your best to save up quickly.
You could take on a second temporary job, sell stuff, or work overtime. Another option is to simply make your current vehicle last until you can save a large down payment for your next car loan. Trust me, waiting a few extra months will be worth it when you save a ton on your car loan!
3. Shop for your loan
Finally, we come to the reason why we wrote this article in the first place. Once you’ve followed the first two steps, it’s time to get a car loan. And to get the absolute best rate, you will have to shop around for this loan.
This may mean checking your local credit unions and banks. Or you can use the well-described tools below to consolidate your online purchases.
Either way, be sure to shop within two weeks. This will allow FICO and other credit scoring algorithms to count all of your purchases in a single hard pullon your credit report. Thus, your score will take a temporary hit. But it will be smaller than if you drag out your credit applications over several weeks.
As you shop, experiment with different scenarios. For example, could you get better financing by paying $500 more for the down payment? Does it make sense to shop for a newer, lower mileage vehicle of a less expensive make and model? Looking at a few different scenarios will help you find the best financing possible.
Where to find the best car loan rates
Shopping around for auto loan rates is easier than ever with the internet. Loan aggregators like Monevo make it easier to review potential rates from multiple lenders at once (more on that below). Here’s where you should look for the best auto loan rates:
1. Your local credit union
credit unionsare an often overlooked source of financing for auto and other loans. Credit unions are a particularly good option if you don’t have the best credit. Sometimes they’ll overlook a bad credit score in favor of other proof that you can manage your money well.
That’s the good news. The bad news is that applying for a loan from a credit union maytake a little longer. You may need to speak to someone on the phone or in person to get your loan offer. It’s not always the case. But it’s more likely.
However, it can be to your advantage if you want to take the time to explain your credit situation in more detail. A credit union loan officer often has more leeway to make favorable decisions based on a personal conversation, rather than just a list of personal data.
2. Your own bank
Buying credit from your own bank, especially if you have an existing relationship, is always a good option. Banks, especially large ones, are more constrained in their lending decisions than credit unions. But they can still consider your banking history when deciding your loan offer. And that can be a good thing.
the Monevo is a good place to get a set of auto loan deals. By sharing some basic information such as your name and employment details [wp_shortcode_85] is able to forward your information to a variety of lenders.
From there, you’ll have a list of car lenders and loans that meet your buying needs. You can then compare the finer details of each.
To save even more time, you can filter your search by estimated credit score and loan amount. This ensures that you are only connected with lenders that match what you are looking for.
Overall, Monevo will provide you with a clear idea of your financing eligibility and the interest rate you are offered. Once you find a lender that piques your interest, you can contact them directly to start the formal application process.
To visitMonevoor read the full review
4. Cars Direct
This site specifically searches for dealer financing in your area. The application process is quick and easy, but it doesn’t spit out an immediate response. Instead, you receive an email later with the potential lender’s information.
For me, CarsDirect gave good results. But it could be an option for finding good dealer financing. (Which can, in fact, be the best deal, sometimes!) Plus, you can also use it to search for vehicles in your area.
But what is a good price?
While you’re doing all that shopping, it can be helpful to have an assignment for car loan rates. This way you know if you are getting a good deal or not. Digging average auto loan rates is a little harder than digging average mortgage rates.
Check out the table below for competitive rates on automotive purchases: